Correlation Between Walmart and Ero Copper

Can any of the company-specific risk be diversified away by investing in both Walmart and Ero Copper at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Walmart and Ero Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Walmart Inc CDR and Ero Copper Corp, you can compare the effects of market volatilities on Walmart and Ero Copper and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Walmart with a short position of Ero Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Ero Copper.

Diversification Opportunities for Walmart and Ero Copper

-0.9

Correlation Coefficient

Walmart  Ero Copper

Pay attention - limited upside

The 3 months correlation between Walmart and Ero is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Walmart Inc CDR and Ero Copper Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ero Copper Corp and Walmart is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Walmart Inc CDR are associated (or correlated) with Ero Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ero Copper Corp has no effect on the direction of Walmart i.e., Walmart and Ero Copper go up and down completely randomly.

Pair Corralation between Walmart and Ero Copper

Assuming the 90 days trading horizon Walmart Inc CDR is expected to generate 0.41 times more return on investment than Ero Copper. However, Walmart Inc CDR is 2.46 times less risky than Ero Copper. It trades about 0.21 of its potential returns per unit of risk. Ero Copper Corp is currently generating about -0.23 per unit of risk. If you would invest  3,488  in Walmart Inc CDR on September 23, 2024 and sell it today you would earn a total of  514.00  from holding Walmart Inc CDR or generate 14.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Walmart Inc CDR  vs.  Ero Copper Corp

Walmart Inc CDR

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart Inc CDR are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Walmart displayed solid returns over the last few months and may actually be approaching a breakup point.

Ero Copper Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ero Copper Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Walmart and Ero Copper

The main advantage of trading using opposite Walmart and Ero Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Ero Copper can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Ero Copper will offset losses from the drop in Ero Copper's long position.

The idea behind Walmart Inc CDR and Ero Copper Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Bonds Directory module to find actively traded corporate debentures issued by US companies.